Paradigm Shift: Nationalizing the Banks

I turned on the Sunday morning talk shows today expecting to see some hardcore partisan bickering, and there certainly was a lot of it, but on This Week, there was a decidedly different dynamic going on regarding the issue of nationalizing the banks. The guests on the show, Rep Waters, D-Calif., Rep King, R-N.Y., Sen Schumer, D-N.Y., and Sen Graham, R-S.C, generally talked about differences along party lines, but Waters, King, and Graham were in relative agreement on the possibility of nationalization prompted by a recent WaPo editorial.

Here's the link to the Op-Ed: http://www.washingtonpost.com/wp-dyn/content/article/2009/02/12/AR2009021201602_2.html?sid=ST2009021203365

Nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and finally allow lending to resume. Of course, the economy would still stink, but the death spiral we are in would end. [...]

Nationalizing banks is not without precedent. In 1992, the Swedish government took over its insolvent banks, cleaned them up and reprivatized them. Obviously, the Swedish system was much smaller than the U.S. system. Moreover, some of the current U.S. financial institutions are significantly larger and more complex, making analysis difficult. And today's global capital markets make gaming the system easier than in 1992. But we believe that, if applied correctly, the Swedish solution will work here.

The clip is here: http://abcnews.go.com/video/playerIndex?id=6882737

Senator Graham was especially surprising in his resignation to this finality; however, I feel I agree the most with President Obama and Senator Schumer - sound and targeted monetary and fiscal policies related to the banks can work without resorting to nationalization of the banks. Unfortunately, I am open to the nationalization talk that is occurring. I think that it's really important and interesting for us to talk about these somewhat radical alternatives and solutions, regardless of whether or not it happens. By analyzing all of these issues, we can create a better understanding of the stakes and what must be done.